Synopsis: Water tables in the northern regions of the Indian state of Gujarat have been falling over the last three decades by as much as 2.5-3 meters a year. This is raising concerns of irreversible salinization and increasing water costs and well-deepening expenses on both farmers and state budgets.

Water tables are falling because agricultural activity – central to the state’s economy – is using up groundwater faster than it can be replenished. The Gujarat government provides energy subsidies to farmers who spend money pumping groundwater as a way to encourage farming among its people. This creates a vicious cycle because farmers have no incentive to conserve water, thereby lowering the water table and increasing the amount of energy and money needed to pump water.

Study Area: Kukarwada Substation, District of Mehasana (North Gujarat).

Climate: Semi-arid, extreme temperatures, high evaporation, low and erratic rainfall occurring mostly between June and September, annual mean of 738 mm with year to year variability at about 50%

Irrigation: The conditions above make agricultural intensification highly dependent on irrigation. Irrigated agriculture supports over half the population and uses more than 70% of the area. Irrigation is heavily reliant on electricity for pumping.

Agricultural Income and the Power Subsidy

In most Indian states where agriculture is groundwater intensive, electricity for irrigation is provided at a low and usually flat rate. This zero marginal rate for energy and water is often blamed for reducing the incentives for water and energy conservation and making agriculture inefficient. Over time, as the water table declines, energy efficiency also declines because more energy is required to lift the same amount of groundwater. Moreover, farmers have to continually deepen their wells to chase the water table.

A way out of the vicious cycle?

We propose a novel mechanism to incentivize reduced energy and water use, stabilize water tables and maintain rural incomes. The new scheme places an effective price on energy, and thus water, without economically burdening farmers.


  • Providing farmers with guaranteed entitlements of electricity that mirror present use.
  • Allowing farmers to reduce electricity consumption in return for cash compensation and to trade in energy permits. Gujarat provides a favorable piloting ground because of its extreme water table depths and because partial reform (Jyotigram) has already been carried out.

The pilot experiment is being carried out in cooperation with the Government of Gujarat.